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Updated from 12:01 p.m. EDT

Crude oil prices erased an early loss to close higher Monday and are now less than $1 below their all-time high of $42.33 a barrel touched in early June.

The benchmark U.S. crude gained 14 cents to $41.44, while gasoline prices fell 1 cent to $1.291 a gallon.

Traders remain focused on the outlook for short-term supplies.

The Organization of Petroleum Exporting Countries last week said it had decided to increase its production ceiling by half a million barrels a day in August and also cancelled a July 21 meeting on the issue.

The measure was part of a broader agreement reached at OPEC's June 3 meeting, when it decided to increase official production by two million barrels a day in July. Prices touched a record high of more than $42 a barrel right before that meeting.

The August increase will put OPEC's official production ceiling at 26 million barrels a day, although its members routinely produce more than their individual quotas. A recent International Energy Agency report said the cartel produced more than 28 million barrels a day in July, when its ceiling was just 23.5 million barrels a day.

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At one point recently, oil prices had fallen 15% from their record high, closing below $36 a barrel.

Since then prices have bounced back on worries about production levels in such major oil-producing countries as Iraq, Norway, Nigeria and Russia, as well as terror attacks on the U.S. ahead of the presidential election.

During May, traders relentlessly bid up prices on short-term supply concerns triggered by strong global demand and terror attacks on oil-industry personnel and facilities in the Persian Gulf region ahead of the peak summer driving season in the U.S. and Europe.

High prices are beginning to show up in the second-quarter earnings results of major U.S. energy companies.

Occidental Petroleum

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posted a 50% jump in profit, as net income jumped to a record $581 million, or $1.48 a share, compared to $374 million, or 98 cents a share, in the second quarter of 2003. Revenue rose to $2.75 billion from $2.26 billion in the year-ago period.